Think Twice Before Picking Retirement Date

By Ray and Dana Brandon

Ray’s Take “When I hit age 65, I’m out of here,” is a common enough observation. Global competition, increased governmental regulation and the speed of technological innovation have made working careers more unnerving than ever. That magical number “65” was selected a long time ago when life expectancies were a good bit shorter. We run our retirement models to at least age 95 now. Delaying retirement beyond that magical number of 65 for even a few years can make a significant difference in your financial security.

Let’s say you delay retirement for three years. That means your monthly Social Security benefits would start larger and have a greater base for cost of living increases. It also means any 401(k) or pension plans you participate in would have three more years of contributions and growth. Your non-qualified savings and investments would also have three additional years of potential growth. Plus, these incremental increases will compound in value over time.

However, the biggest reasons for delaying retirement is that you won’t have to start withdrawing from your savings for living expenses for those years, and you have three fewer years of life expectancy.

Don’t assume you’ll magically find part-time work – a “plan” I hear expressed sometimes. Those jobs just aren’t out there. Employers tend to hire someone younger with more current skill sets, and who would have less of an impact on the cost of benefits and require a lower salary.

The key is to make a realistic plan that factors in inflation, long life expectancy and loads of surprises. If there’s not much room for error in that plan, it’s not likely to turn out well. That may require you to work longer, save more or both.

Dana’s Take Working longer isn’t only beneficial to your financial situation. Studies show staying employed is better for your health and mental well-being, too. When you’re working, you stay busy, connected to others and have a clear purpose. Those are all positive factors that may not be easy to replace in retirement.

One study found that retirement increased the likelihood of clinical depression by 40 percent and the chance of having at least one diagnosed physical condition by about 60 percent. The study concluded that there were health benefits to staying employed past traditional retirement age.

On the other hand, a study by the American Psychological Association Center for Organizational Excellence found that workers over age 55 were the demographic most satisfied with how their job fit into their lives, with 80 percent of them acknowledging job enjoyment as the reason they continued to work – a number 22 percentage points higher than those 18 to 34.

Why quit work when you’re enjoying it most? Stay on the job an extra few years for your health as well as your wealth.

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.